Ukraine: “Huge Opportunity” For Satellite

[12-10-07 – Satellite News] Vision TV will launch commercial direct-to-home (DTH) services in Ukraine in the first quarter of 2008, as it looks to tap into one of Eastern Europe’s biggest markets for pay-TV services.
“The growth potential is enormous,” Richard Caproni, general director of Vision, told Satellite News. “You have over 17 million households in Ukraine and not many TV options for the population. According to the cable union, there are around 7 million households in the area of cable networks, leaving at least 10 million whose options are very limited. So, there is a huge opportunity for satellite. Our positioning is not to come in as an exclusive service or as a premium service but to target middle class Ukrainian households, which is a much wider target market but still a limited number of people due to the economic situation in the country.”   

Initial Goals

    The challenge for Vision TV, which will launch its service under the brand Viasat, will be to demonstrate the benefits of pay-TV to a customer bas, which is not necessarily used to paying for the service. “Ukraine is an extremely difficult working environment,” he said. “The country has a long way to go in terms of implementing and enforcing a proper market economy infrastructure. That environment itself is likely to slow things down as it has slowed down development of just about every other sector in the country. Bu, when it comes down to it, a market of this size is exciting. There is huge potential for new subscribers, probably the biggest in Europe.”
    Caproni would like to see 50,000 subscribers in Vision’s first year of operations and reach profitability within three years. Keeping entry-level costs down for the subscriber will be vital. “We do not want to disclose how much that entry point will be for subscribers yet since it will be part of our launch campaign, but business will contribute significantly to decrease that price for the subscriber,” he said. “Although it is unlikely to be like Romania, where providers give away the set-top boxes, … we will gauge this on an ongoing basis in order to make sure we hit our numbers. We need to see how the market reacts to the upfront initial entry cost. It could significant alter our expenditure in terms of gaining subscribers.”
Along with offering strong local content, Vision must build an effective sales and distribution network, Caproni said. “Ukraine is a large country with not the greatest infrastructure between different parts of the country. Therefore, having a strong distribution network is critical to success in this market. For this, we are leveraging eight years of experience with a company called Strong Ukraine, which is an affiliate of our shareholder, Strong Media Group. They already are the leading seller of set-top boxes and satellite dishes in the country and having that base on which to work is critical.
    NDS is supplying middleware and conditional access services for Vision, and NDS CEO Ade Peled also is upbeat about the operator’s prospects. “The cost of technology coming down means DTH operators can offer low-cost solutions. Satellite has a real advantage in terms of rapid deployment, particularly when you are going into diverse geographies.”

Advanced Services

    It may be a while before Vision launches advanced services such as high-definition (HD) content, but Caproni believes the market for HD could heat up quickly. “What you have in the Ukraine is that the top 5 percent of the population who economically can afford the service pretty easily,” he said. “One thing we did with market research in terms of trying to figure what demand would be like was trying to track the sales of large size plasma TVs. For 2006, just the top three sellers sold over 350,000 plasma TVs in 2006. The suppliers think they have 50 percent of the market so the sales could be twice that. Based on that, I think you can see a sizeable audience for HDTV pretty quickly.”
    However, while HD-ready TV penetration could see explosive growth, Vision TV has no immediate plans to bring HD services to customers. “We are not looking to bring HD channels or an HD set-top box in the first year,” he said. “In terms of how quickly, that will depend on how quickly subscriber uptake goes. The strategy is to get a core base of non-premium pay-TV subscribers and gradually have these customers grow. We will grow with them as their disposable income rises by introducing new services and more premium content. …. In terms of an HD or a [personal video recorder] box, I think it could be anywhere from one to three years. The soonest would be at least 12 months.”
    The operator also would be interested in potentially developing an IPTV strategy, although with broadband penetration still low in Ukraine, this is again, something for the future. “A recent newspaper article here said there were only 750,000 broadband subscribers here,” Caproni said. “That is a very limited market to be able to tackle. It is heavily concentrated in Kiev and two to three of the other major cities in Ukraine. I think the timeframe for that will be long term, although there are telcos in Kiev who are trying to prop things up and doing testing. Some market entrants will make a real go at it in the near future. We will see how they fare before we go down that path.”